Navigating Social Security: Taxes, Benefits, and Retirement Age

The federal income threshold to determine if you’ll have to pay taxes on your Social Security benefit has never been adjusted for inflation, resulting in an increasing proportion of seniors having to pay taxes on their benefits each year. The percentage of all tax returns with taxable Social Security benefits grew to 33% in 2017 from 7.4% in 1999, and the Congressional Budget Office predicts that it will grow to more than 50% by 2046. If Social Security income thresholds were indexed to inflation, the first thresholds of $25,000 for individuals and $32,000 for joint filers would rise to $73,000 and $93,200, respectively. To avoid taxes, Social Security beneficiaries can plan to reduce their provisional income, including converting some of their 401(k) or traditional IRA to a Roth IRA before retiring.